Brazil cracks down on coffee firms for alleged tax fraud

FILE PHOTO: A harvesting machine is seen at a coffee plantation in Sao Sebastiao do Paraiso, Brazil April 22, 2019. REUTERS/Amanda Perobelli

SAO PAULO (Reuters) - Brazilian authorities launched raids and issued multiple arrest warrants as part of a probe to crack down on coffee industry companies accused of evading taxes, according to prosecutors in the state of Minas Gerais on Tuesday.

Coffee cooperatives, wholesalers, coffee brokers and roasters in four Brazilian states took part in the scam, the Minas Gerais prosecutors office said in a statement, adding that their actions avoided tax collection in a total value of 1 billion reais ($178.75 million).

The investigation spans 39 cities in the states of Minas Gerais, Espirito Santo, Sao Paulo and Parana, the statement said.

Minas Gerais is Brazil’s No. 1 coffee producer, while Espirito Santo state leads in the production of the robusta variety widely used by the instant coffee industry.

Tiago Vicentini de Oliveira, a police officer coordinating the task force that investigated the scheme, said in a press conference on Tuesday that roasters in Parana benefited from buying coffee in Minas and Espirito Santo using shell companies based in Sao Paulo to avoid payment of certain state taxes.

The Brazilian tax system is complex, particularly regarding the ICMS state tax whose rate varies from state to state.

The authorities did not name the companies being investigated.

Brazilian authorities were serving 35 arrest warrants in connection with the probe, which also involves freezing assets of the suspected parties, the prosecutors said.

($1 = 5.5993 reais)

Reporting by Ana Mano; additional reporting by Marcelo Teixeira; editing by Jonathan Oatis and Nick Zieminski